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Do we need a minimum wage law?

The article explains the evolution of concept of minimum wages and the need to bring them at par for permanent and contractual workers.

Recently, trade unions announced All India strike for hike in the minimum wages. The government soon announced a hike in minimum wages, but only for unskilled non-agricultural workers, from Rs.246 to Rs.350 per day, or Rs.9,100 per month.

The central trade unions, barring the Bharatiya Mazdoor Sangh (BMS), have dismissed the hike as meaningless and announced that they will proceed with the strike.

This chain of events raises many questions: What is an appropriate minimum wage? How does one arrive at it? Does India still need something like a minimum wage?

Many reasons have been adduced for scrapping the minimum wage:

Liberalisation: The market and not the government should determine prices so as to preserve efficiency and competitiveness.

‘Make in India’ initiative: For foreign capital to make in India, Indian labour has to remain cheaper than Chinese, Vietnamese, Cambodian and Bangladeshi labour.

Third is a logic that is popular among economic reformers: scrap it if it’s not working. Neither industry bodies nor the state nor unions can claim that the Minimum Wages Act (MWA) is seriously implemented. India anyway has still not ratified the United Nations’ Convention No. 131 (adopted in 1970) on Minimum Wage Fixing.

Why have a minimum wage?

MWA is one of the first laws of independent India, legislated in 1948, even before we had a Constitution in place.

The real motive was to buy peace on behalf of a national bourgeoisie that had to manage a working class that was far more militant in those days.

India was a poor country with a major surplus of labour. There were too many jobs where labour did not have the bargaining power to demand a wage sufficient to survive on.

Conditions where employers get away with paying workers too little generate several social costs, such as poverty, malnutrition, endemic debt leading to bonded labour, and child labour, which could be avoided through fair wages.

Three levels

The Tripartite Committee on Fair Wages, appointed in 1948, defined three different levels of wages: a living wage, a fair wage, and a minimum wage.

Living wage is what a human being needs to get the basic essentials of food, shelter, clothing, protection against ill-health, security for old age, etc.

A fair wage is lower than the living wage and takes into account efficiency, from the employer’s perspective.

Minimum wage is similar to the fair wage except in two respects: it is even lower, and has a statutory dimension.

Today, there is broad consensus among patriotic businessmen and nationalist policymakers that mandating a living wage or even a fair wage for Indian workers is a ridiculous idea not worth discussing.

The resolution passed at the 15th Indian Labour Conference in 1957 mandates taking into account five factors for calculating the minimum wage:

The wage must support three consumption units (individuals);

Food requirement of 2,700 calories a day;

Clothing requirement of 72 yards per worker’s family;

Rent for housing area similar to that provided under the subsidised housing scheme;

Fuel, lighting and miscellaneous items of expenditure to constitute 20 per cent of the minimum wage.

In 1991, the Supreme Court called for adding another 25 per cent to the wage yielded by the above calculation in order to take into account children’s education, medical requirements, etc.

If calculated using these parameters, some estimates put the minimum wage at Rs.26,000 per month. This is the amount Central government employee unions are demanding from the Seventh Pay Commission, which had fixed their minimum wage at Rs.18,000.

Minimum wage via pay parity

Typically, the actual minimum wage is close to or less than Rs.4,800, currently the National Floor Level Minimum Wage.

Even in post-liberalisation India, no industry lobby can openly argue that contract workers should be paid less than permanent workers for the same work.

The government should bring an amendment in the parliament to raise the minimum wage of contract workers by bringing it on a par with permanent worker wages, and encourage their regularisation.

Question:

Even after so many years of independence and having Minimum Wages Act, we are struggling to provide basic wages to our labourers. In your opinion how can we amend this law to benefit labourers. What other reforms can government bring in to raise their standard of living.

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